Full report
Executive summary
A UK company which forms part of one of the world’s largest oil trading multinationals, and which handles much of its oil trading business, has since 2009 been paying four-fifths of its operating profits to a related company in the Swiss canton of Zug: significantly reducing its UK tax liabilities.
HMRC first challenged these payments in 2011, and has claimed that they are in large part for services that are value-less. Yet as TaxWatch has discovered, these payments – of tens of millions of pounds every year – have continued unmodified to the present day.
This report asks: why has this multi-billion-pound tax avoidance dispute not been resolved? Why has it been subject to informal closed-door negotiations outside the courts for over six years – despite HMRC publicly insisting that the ‘diverted profits tax’ (DPT), which forms much of the tax at issue, is not eligible for such negotiations?
And why, from May 2026, could the question of whether £1.5 billion of UK tax is due be decided by an unnamed panel of foreign arbitrators: whose deliberations remain entirely secret; whose rulings the taxpayer can insist are never disclosed; and who can impose an all-or-nothing decision in which HMRC risks losing its entire claim?
HMRC insists that the era of aggressive tax avoidance by multinationals is largely over. This justifies its ‘cooperative compliance’ approach to big businesses. Litigation is rare and activities to “promote compliance and prevent non-compliance before it occurs” are prioritised. Though many large companies may have changed their tax behaviour, this report raises the question of whether the emphasis on cooperative compliance has ‘defanged’ HMRC when dealing with those which choose not to cooperate. HMRC has never used special measures and strict liability penalties introduced a decade ago for large corporates that it judges persistently engage in aggressive or speculative tax planning. Meanwhile, the UK government is deliberately making it easier for multinationals to obtain unaccountable and entirely secret international tax settlements covering hundreds of millions of pounds of tax.
This report provides the first detailed account of what is likely the UK’s largest ‘diverted profits’ tax case, and possibly one of the UK’s largest tax disputes overall. It is based on court records, financial accounts, and information provided by the company itself, Glencore Plc. During 2025 alone, the tax at stake in this case has increased by US$826 million (£620 million), and now stands at over US$2 billion (£1.5 billion) in total. Glencore refutes HMRC’s characterisation of its Swiss transactions, and rejects what it calls HMRC’s “hastily-estimated” tax charge.
Though HMRC continues to pursue the additional tax it assesses is due, the case shows how UK government policy and legal changes since 2017 have explicitly encouraged large businesses to access “less formal”, closed-door international tax negotiation processes that take priority over UK courts. In this case, such processes have delayed the resolution of a multi-billion-pound UK tax assessment for over six years and counting.
This year’s unprecedented energy supply shock puts the potential cost of this frozen dispute into context. Our report confirms for the first time that the payments which began in 2009, and which HMRC claims artificially shift Glencore’s oil trading profits from the UK to Switzerland, are continuing unmodified to the present day. Unless HMRC’s fifteen-year tax dispute with Glencore is resolved in HMRC’s favour during 2026, profits that Glencore’s London-based oil traders may make during the current closure of the Strait of Hormuz can continue to be transferred to Zug.
Key findings
- The UK oil trading unit of commodities multinational Glencore Plc buys and sells tens of billions of dollars of oil and gas every year. A UK subsidiary company that handles much of this business, Glencore Energy UK Ltd, has since 2009 booked nearly US$1 trillion (£730 billion) of revenue in the UK, declared a pre-tax profit margin of less than 0.05%, and declared tax liabilities of just US$76 million (£57 million).
- While there is no suggestion that Glencore has engaged in unlawful or fraudulent behaviour, the UK tax authority (HMRC) claims that since 2009 Glencore Energy UK Ltd has shifted 80 percent of its operating profits from the UK to Switzerland, through fees paid to another Swiss subsidiary for services and insurance. HMRC has claimed that the portion of the fees paid to Switzerland for ‘non-routine services’ – services other than storage and transport facilities actually provided and charged at market rates – were not simply overpriced, but should be valued at zero, and that in responding to HMRC’s tax notice the company “has not provided evidence of actual services provided, benefits received by [the UK company] and pricing”, but simply “a one page appendix…which gave examples of services provided….No details were provided. No calculations were provided for the value of these services”.(Glencore told TaxWatch that it has since provided HMRC “with many hundreds of pages of explanation and documentation supporting the substantial contribution of [the Swiss subsidiary] to [the UK subsidiary’s] ability to conduct its business”).
- HMRC has made assessments of additional UK tax due to this alleged profit-shifting that in December 2025 reached US$ 2.063 billion (£1.55 billion). The Diverted Profits Tax, introduced in 2015, has required Glencore to pay over £1 billion up-front, but Glencore continues to reject HMRC’s assessment entirely, and to seek a full refund.
- In November 2017 the UK’s Court of Appeal found that HMRC’s decision to strike out the majority of the Swiss payments for tax purposes “was clearly a rational one”, and that the UK tax courts should determine the dispute.
- In 2019 the case duly arrived in the UK’s First-Tier Tax Tribunal. However, Glencore applied to the Swiss tax authority to pursue the case in a Mutual Agreement Procedure (MAP) with HMRC, under the terms of the UK-Swiss tax treaty. HMRC has publicly insisted that tax treaties do not cover the Diverted Profits Tax (DPT), and that MAPs therefore do not apply to DPT assessments. Nonetheless one part of HMRC, responsible for international tax relations, initially wrote to Glencore that its case was “most definitely within MAP” and that it was in theory “willing to discuss” Glencore’s MAP request with the Swiss tax authority, though it wanted the UK court case to proceed first. Citing this letter, the UK court rejected HMRC’s objection to the suspension of the UK court case, allowing the case to move to informal closed-door negotiations between tax authorities. HMRC did not appeal this decision. These UK-Swiss negotiations have now run on far beyond HMRC’s target of 24 months for resolving such cases.
- It is UK policy to promote the ability of multinationals and other cross-border taxpayers to demand that if tax authorities do not reach agreement on MAP cases after a set time limit — usually two or three years — they should be decided instead not by courts but by a panel of arbitrators selected by both tax authorities, whose decision is binding on both countries. Such mandatory binding arbitration is promoted by the OECD, but remains controversial, and only 34 of the 110 signatories to the OECD’s 2015 Multilateral Convention on tax treaties have agreed to it, with others regarding it as an unacceptable loss of tax sovereignty. In 2021 – with the Glencore MAP already in progress – the UK and Swiss tax authorities signed an agreement detailing the rules for mandatory binding arbitration in MAP cases. This agreement allows the arbitrators – who are not judges or officials of either country – to set their own evidentiary and procedural rules; allows the taxpayer to veto the publication of the decision, unlike a court or tribunal; and in two of the three possible arbitration processes specified in the agreement, it mandates a ‘baseball’ (all or nothing) decision where arbitrators simply select one side’s position, and are specifically instructed not to provide any explanation of their decision.
- Glencore has told TaxWatch that its multi-billion-pound tax assessment will qualify for this secret, binding arbitration process from May 2026.
Despite the experience of the Glencore dispute, the government passed little-noticed UK legislation in March 2026 which is designed specifically to ensure that multinational companies which HMRC assesses are diverting profits artificially to tax havens can insist on such closed-door international settlements in Diverted Profits Tax cases in future. The size of the tax at stake in such diverted profits cases has risen by over £1 billion since 2022, and in March 2025 (the latest available figures) stood at £3.5 billion.
Recommendations
- As Parliament’s Public Accounts Committee has insisted since 2011: there should be transparency about HMRC large business tax settlements. This should include MAP agreements regarding UK large business taxpayers. For all large business settlements where there is over £1 million of tax under consideration, HMRC should publish: the company name; the amounts of additional tax originally assessed; and the amounts of additional tax, interest and penalties finally imposed after all appeals have been exhausted.
- The UK government should reconsider its blanket support for taxpayer access to secret, mandatory binding arbitration in cross-border tax disputes.
- There should be no secret settlements with large business taxpayers. HMRC should therefore stop including secrecy provisions in MAP and arbitration clauses in tax treaties, and should seek to remove them from existing tax treaties over time.
- If the UK government insists on continuing its support for mandatory binding arbitration, it should:
- set out clear conditions detailing what types and sizes of disputes may be referred to mutually binding arbitration, and seek to include these conditions over time in new and existing tax treaties;
- not agree mandatory binding arbitration provisions with low-tax jurisdictions, and seek to remove them over time from existing tax treaties with low-tax jurisdictions;
- only agree mandatory binding arbitration bilaterally with individual jurisdictions, and therefore withdraw its opt-in to the optional arbitration provision in the OECD BEPS Multilateral Instrument.